PEG Company Profile

PSEG has four principal direct wholly-owned subsidiaries: PSE&G, Power, Energy Holdings and PSEG Services Corporation (Services). The following organization chart shows PSEG and its principal subsidiaries, as well as the principal operating subsidiaries of Power: PSEG Fossil LLC (Fossil), PSEG Nuclear LLC (Nuclear) and PSEG Energy Resources & Trade LLC (ER&T); and of Energy Holdings: PSEG Global LLC (Global) and PSEG Resources LLC (Resources).

PSEG’s objective is to reduce future volatility of earnings and cash flows principally by entering into longer-term contracts for material portions of its anticipated energy output and by reducing exposure to its international businesses by seeking to opportunistically monetize investments of Energy Holdings that may no longer have a strategic fit. PSEG also expects a gradual decline in earnings from Resources’ leveraged leasing business due to the maturation of its investment portfolio.

Pwer
A Delaware limited liability company formed in 1999 that integrates its nuclear, fossil and renewable generating asset operations with its wholesale energy sales, fuel supply and energy trading functions.

Earns revenues from selling under contract or on the spot market a range of diverse products such as electricity, natural gas, capacity, emissions credits and a series of energy-related products used to optimize the operation of the energy grid.

PSE&G

A New Jersey corporation, incorporated in 1924, which is a franchised public utility in New Jersey. It is also the provider of last resort for gas and electric commodity service for end users in its service territory.

Earns revenues from its regulated rate tariffs under which it provides electric transmission and electric and gas distribution to residential, commercial and industrial customers in its service territory. It also offers appliance services and repairs to customers throughout its service territory.

Has also implemented demand response and energy efficiency programs and invested in solar generation within New Jersey.

Our other direct wholly owned subsidiaries are: PSEG Energy Holdings L.L.C. (Energy Holdings), which earns its revenues primarily from its portfolio of lease investments; PSEG Long Island LLC (PSEG LI), which operates the Long Island Power Authority's transmission and distribution system under a contractual agreement; and PSEG Services Corporation (Services), which provides us and our operating subsidiaries with certain management, administrative and general services at cost.

The following is a more detailed description of our business, including a discussion of our:
Business Operations and Strategy
Competitive Environment
Employee Relations
Regulatory Issues
Environmental Matters

Customers

As EWGs, Power’s subsidiaries do not directly serve retail customers. Power uses its generation facilities primarily for the production of electricity for sale at the wholesale level. Power’s customers consist mainly of wholesale buyers within the Super Region, primarily within PJM, but also in New York, Connecticut and the Midwest. As a result of the 2003 New Jersey BGS auction, Power entered into hourly energy price contracts to be a direct supplier of certain large customers through the BGS auction and entered into contracts with third parties who are direct suppliers of New Jersey’s EDCs. As a result of the 2004 New Jersey BGS auction, Power will be a direct supplier of New Jersey’s EDCs. In addition, Power extended into the New England Power Market by securing a three-year, full requirements contract with a Connecticut utility with an expected peak load of 1,150 MW, has entered into four year contracts totalling 500 MW with two Pennsylvania utilities and is considering entering into similar opportunities in other states.

Global has ownership interests in four distribution companies which serve approximately 2.8 million customers and has developed or acquired interests in electric generation facilities which sell energy, capacity and ancillary services to numerous customers through PPAs, as well as into the wholesale market.

Competitive Environment

The electric and gas transmission and distribution business has minimal risks from competitors. PSE&G’s transmission and distribution business is minimally impacted when customers choose alternate electric or gas suppliers since PSE&G earns its return by providing transmission and distribution service, not by supplying the commodity.

Through its operating subsidiaries, Power competes as an independent wholesale electric generating company, primarily in the Northeast. Most of Power’s generating assets are strategically located within the Pennsylvania, New Jersey, Maryland Interconnection (PJM), one of the nation’s largest and most developed energy markets. Power has extended its generation business into New York, Connecticut and the Midwest states.

Power’s competitors include merchant generators with or without trading capabilities, utilities that have generating capability or have formed generation and/or trading affiliates, aggregators, wholesale power marketers or combinations thereof. These participants compete with Power and one another buying and selling in wholesale power pools, entering into bilateral contracts and/or selling to aggregated retail customers. Power believes that its asset size and location, regional market knowledge and integrated functions allow it to compete effectively in its selected markets.

Energy Holdings and its subsidiaries continue to experience substantial competition, both in the U.S. and in international markets. In the U.S., an overbuild in generation has led to a large capacity surplus in several regions, including Texas. This has resulted in reduced operating margins for both independent power producers and utility generators.